Home-flipping is not only a trend but also a common business practice in South Florida, despite the rise of local real estate prices. A flipped home is a home that sells twice within the same year.
Even more so, flippers are surfing the wave of increasing home values that account for stable profits. A crash is not to be feared but good deals are getting harder to spot. Over the period of April, May and June 2015, almost 1,400 single family homes have been flipped in Palm Beach, Broward and Miami-Dade. It accounts for 10% of overall home sales which is the highest percentage among the main US metro areas. Elsewhere, only an average of 4.5% of house sales were flips. It shows how hot of a spot Florida is. The reason why it is such a good bet to flip here is because of price growth and the number of foreclosures.
However, home flipping starts slowing down by 6% year-over-year because the level hit by prices is now getting way out of the flippers’ sweet spot. It may be the sign of a sustainable housing economy after all, as opposed to a bubble. In the most intense days of the bubble, flips represented 14% of all South Floridian sales. Despite the current slowdown in flips, profits are still steady. For example, a flipped home in South Florida is on average bought at $220,000 and sells again 6 months later for $302,000. Even if you discount repairs and closing costs, the gain is quite valuable. It is all about buying low, fixing up and selling high.
Actually, if you can find good deals, it is possible to take the most of rising prices in Miami-Dade. They are growing by 8% which is slower that the first stage of the recovery, yet faster than any other growth rate across the nation. Cashing out happens only after renovation so flippers like to converge to low-priced properties. Indeed, it appeals to both end-users and investors. When priced right, a house in this area can sell within 2 weeks.
A common trick is to buy properties in foreclosure – Almost 1/4 of Miami home sales are distressed – improve them and flip them. The flipper even prefers to sell properties to other investors in order to avoid making extensive repairs. Easy profit. It shows how much the cash buyer currently rules the market.
It is getting more difficult to find suitable deals as not only Latin American buyers but also Israela, Chinese and Russian investors flock towards the same market. Supply is hence becoming short and that makes it a seller’s market. As a piece of evidence, the number of homes listed below $300,000 fell by 29% in 2014!
Locals complain about flippers making competition intensify and prices going up but they also serve a useful function when they turn houses in violations into habitable properties.
Let’s just hope that cash-rich flippers do not impede first-time home buyers looking out for affordable houses to purchase their first home…